Specialty TV channels risk failing with CRTC changes

Every spring, the CRTC releases its report on the profits of Canadian specialty channels and television analysts pore over it to see who is making how much.

For years, the profits have been consistent and healthy. If you are lucky enough to run a Category A specialty station, meaning you were licensed before the rules changed in 2000, you’re doing pretty well. For example, in 2013, FoodTV had a profit margin of 53 per cent, HGTV’s profit margin was 58 per cent. Both Fashion Television and BookTV made $2.7 million in pre-tax profit, with less than one staff member assigned to each channel.

Life is sweet. But that’s about to change.

Specialty channels in Canada are facing a shakeup in their industry that will likely result in the death of at least a few of them and reduced profit margins for many others. Two issues are at play as the CRTC moves to reset television regulation in Canada: pick and pay and genre protection.

While, it’s not yet clear exactly how pick and pay will evolve, the CRTC has suggested a small basic package of local and educational channels, with everything else available à la carte. Bundles will still exist, but consumers will also have the option to buy one channel at a time.

Independent technology analyst Carmi Levy says it will be a different world.

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"If you're a specialty channel that's lived within the protective cocoon of bundling for years, you've gotten used to having a full-time job with benefits. Contrast that with living outside the protective cocoon, you're essentially a freelancer, you fight for every contract, you have no benefits, there are no guarantees that money will be coming tomorrow or next week."

The CRTC is also looking at removing genre protection for the 60 channels with a Category A licence. That licence gives the channel guaranteed carriage and protection from direct competition. In a discussion paper released two weeks ago, the regulator suggested getting rid of genre protection and allowing open competition among all specialty channels.

This proposal worries Don Gaudet, vice-president of programming with Stornoway Communications. He runs ichannel, a Canadian public affairs and social issues network that currently has genre protection. He says that ichannel was licensed as a niche channel that was needed in Canada and he is concerned that ichannel will now have to compete against general entertainment channels.

"I'm not against the free market," says Gaudet. "But the free market with one hand tied behind your back because we still have regulatory obligations isn't really a free market."

The CRTC says that it is not turning away from its mandate to encourage a diversity of Canadian voices on television, but the regulator is trying to manage the tension between consumers’ desire for choice and flexibility with the need to protect Canadian voices and the Canadian industry.

Jean-Pierre Blais, the chairman of the CRTC, thinks Canadian producers will rise to the challenge.

"Good entrepreneurs will find a way to succeed. There's an enormous amount of talent in this country, of independent producers that produce great content, on the English side, the French side, or third language. I'm ready to bet that they'll step up and do great content and those will survive. Does that mean every specialty channel will survive? No, I don't think so."